As an increasing number of Brentwood homeowners become “empty nesters”, they have begun to consider selling their home. They may own a home with four or five bedrooms and high maintenance costs and may feel it no longer makes sense to keep such a large property. There are many factors to consider in the decision making process.
One option is to sell the house at a current very high price and purchase a smaller more practical place in which to live. An alternative could be to rent their current home and either buy or rent a smaller place. Of course, another option if the decision is to not move, is to make the current home more practical and comfortable to retain in the future years. Adding a stair lift or elevator may resolve mobility issues, as could the installation of ramps and other helpful devices.
The deciding factor to sell or not may be more emotional than financial. People can become so attached to living in their current home and environment that they find it difficult to consider letting it go and making a change. Sometimes a family member can be influential in the decision making process by wanting the parents to move closer to them and their grandchildren. While this can be a compelling reason to sell, there can also be an opposite position based on financial considerations.
The economics of downsizing may become the determining factor in many cases. If the family needs more funds available for added care or alternative housing costs, the sale could accomplish this. However, there are tax ramifications that are of concern with selling a long-time held residence. If they have owned the property for many years with a considerable increase in value, even with the $250,000/$500,000 capital gains tax exemption, the resultant taxes may be significant. Such gains are taxed at a reduced capital gains rate but still can influence the family’s decision to sell.
Property taxes may be another potential issue to consider. However, owners can carry their current property tax base forward to a replacement home in Los Angeles county and some additional counties, provided that certain conditions are met. Considering that housing costs are substantially lower in many areas other than in Los Angeles County, this could be an added incentive to change locations. Some other relevant issues include liquidity, cash flow, and the possibility of long-term care costs.
While making the decision to downsize is clearly complex, on the positive side there are many benefits to considering a lifestyle change, perhaps to a condo where there are no property maintenance costs as they are included in monthly dues. Condo living can offer more freedom to travel and more security. Open discussions with family members, Realtor and other professionals can lead to a well thought through decision.
Michael Edlen has sold nearly $2 billion, 1,200 homes, and his team has more than 90 years combined experience in real estate. He and his team have represented hundreds of families in the downsizing process and provides real estate counseling services to prospective buyers and sellers. More insight and information are available at michaeledlen.com. He can be reached at 310.230.7373 or Michael@MichaelEdlen.com.
